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S&P upgrades India’s rating to ‘BBB’ supported by robust economic growth, better finances
Aug-16-2025

After a gap of almost 19 years, the rating agency - S&P Global Ratings has upgraded India’s sovereign credit rating to ‘BBB’ with a stable outlook, citing robust economic growth, political commitment for fiscal consolidation and ‘conducive’ monetary policy to check inflation. It highlighted that the country remains among the best performing economies in the world and the quality of government spending has improved in the past five to six years. It noted that the impact of US tariffs on the Indian economy will be ‘manageable’ as 50 percent tariff on exports to US (if imposed) will not pose a ‘material drag’ on growth. It added that the country is relatively less reliant on trade and about 60% of its economic growth stems from domestic consumption. Moreover, the rating upgrade will help lower borrowing cost of Indian companies in international markets.

In January 2007, S&P has placed India on the lowest investment grade rating of ‘BBB-’. In May last year, it changed India’s credit rating outlook to ‘positive’, from ‘stable’, and hinted that a rating upgrade could be coming in the next 24 months. The ‘BBB’ is an investment grade rating and denotes improved ability of the country to discharge its debt obligation comfortably. S&P also raised its short-term ratings to ‘A-2’ from ‘A-3’. The stable outlook reflects S&P’s view that continued policy stability and high infrastructure investment will support India’s long-term growth prospects. That along with cautious fiscal and monetary policy that moderates the government’s elevated debt and interest burden will underpin the rating over the next 24 months.

S&P added that India’s weak fiscal settings had always been the most vulnerable part of its sovereign ratings profile, but with economic recovery well on track, the government can depict a more concrete (albeit gradual) path to fiscal consolidation. It projects general government deficit of 7.3 percent of GDP in fiscal 2026 to decline to 6.6 percent by fiscal 2029. It also added that India’s recovery from its pandemic nadir places it among the best-performing emerging market economies in the world. Further, economic expansion is normalising toward a more sustainable level with good momentum.
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